Having observed the consistently packed warehouse clubs, I often ponder: what exactly are hypermarkets losing on? Is it the positioning and model of hypermarkets themselves that are problematic, or has the industry's operational inertia deviated? To this day, I still believe that hypermarkets, positioned for mass daily necessities, still possess the vitality for sustainable development and will go further than warehouse clubs. However, this is a path that requires continuous self-reform and evolution, and there will always be excellent enterprises achieving this.
On the evening of October 1st, I visited the newly opened fudi warehouse club at Wukesong. At past 8 PM, when most supermarket stores are counting down to closing, there was no sign of closing here; customers were still streaming down the escalators into the store.
The frequent bustling crowds at Sam's Club and Costco have inevitably prompted traditional retail enterprises to reflect: How can hypermarkets leverage their advantages in meeting people's daily needs in the new market environment? On the basis of doing their main business well, can traditional retail enterprises transform into warehouse clubs, and if so, what kind should they build?
Currently, hypermarkets are undoubtedly facing development bottlenecks, but the warehouse club format is by no means a "savior." Its niche customer positioning determines its limited market space and prevents it from becoming mainstream. What hypermarkets should learn from warehouse clubs is not to "copy mechanically" but to adopt their precise format positioning and the operational mindset and capability of providing highly matched products to target customers.
The continued success of foreign retail enterprises in the Chinese market has always been due to their grasp of the middle-class consumer segment as a high-quality customer base. As the mainstay of domestic retail enterprises, regional retail enterprises should always remember how to firmly attract local consumers and how to serve them comprehensively.
Warehouse Clubs Will Not Become Mainstream
In recent years, warehouse clubs have entered a period of rapid development. In the industry's impression, it's mostly the "sea of people" at new store openings of Sam's Club and Costco, but it seems to have forgotten the dismal endings of traditional supermarket giants like Carrefour, Beijing Hualian, and Yonghui Superstores after "copying mechanically."
Cherries are delicious but the trees are hard to grow; the threshold is high.
Among domestic players in this format, Hema is considered a well-performing enterprise, but it also faces the issue of balancing efficiency and scale. Another newcomer, fudi, has achieved initial success partly due to its stores being located in prime business districts in Beijing, a first-tier city, and partly due to its upstream supply chain in agricultural and sideline products. fudi is a culmination of its asset-light approach, crucially without the constraints of traditional retail operating models and inertia.
A warehouse club, often spanning tens of thousands of square meters, typically sells no more than 6,000 SKUs, while a traditional supermarket's store carries at least 20,000 SKUs. This reflects different supply chain operating models and profit philosophies.
Warehouse clubs cater to the daily needs of a niche customer segment with strong purchasing power. Their procurement philosophy is streamlined, leveraging a global upstream supply chain to select a single item from thousands, with few substitutable items within the same subcategory. In contrast, hypermarkets' procurement philosophy is abundance, deeply satisfying consumers' diverse preferences for products within a subcategory.
From the perspective of product strength, warehouse clubs offer high quality at good prices, allowing customers to feel that your bakery items are the best and products are of high quality. The curated 5,000 SKUs reflect product and procurement strength, rather than relying on suppliers to provide products. Moreover, once a product enters a warehouse club, it implies bulk procurement and considerable profits, making it more attractive to upstream supply chain partners.
For example, why can't traditional supermarkets achieve the same operational results as warehouse clubs or even professional bakeries with the same baked bread? Ultimately, it comes down to customer positioning.
Customers who go to warehouse clubs primarily care about product quality, then check if the price is acceptable. Traditional supermarkets' products look decent and are relatively cheaper because their target customers first care about price. For instance, a durian mille crepe cake at 88 yuan per piece, even if improved to 49 yuan per piece in a traditional supermarket, still sells poorly because most customers don't accept paying 49 yuan for a cake under a pound, and some can afford it but are not confident in the quality. Thus, such items turn over slowly in supermarkets, creating a vicious cycle.
In terms of trade area adaptability, warehouse clubs like Sam's Club and Costco are only suitable for first- and second-tier cities and economically developed regions, targeting middle-class families or urban white-collar workers pursuing light luxury consumption.
However, the current sales model of large packages is not actually suitable for young consumers pursuing light luxury. What attracts this group is the satisfaction of their pursuit of quality, pseudo-light luxury, novel shopping experiences, and lifestyle.
Another point is that the large-package sales model in warehouse clubs often causes customers to hesitate when purchasing. For example, they may want to buy several types of bakery items, but each is large, leading to either buying fewer types or wasting. Given the trend of smaller family sizes in China, the large-package sales model in warehouse clubs will inevitably hit a development bottleneck.
As hypermarkets decline, there have been views that warehouse clubs will replace them, but their niche positioning means they will not become the choice for most domestic consumers, nor can they match the resources of most regional trade areas and retail enterprises. They are not a cure for the development difficulties of traditional Chinese retail enterprises. However, as regional retail leaders, they should explore similar formats adapted to the consumption habits of high-end consumer groups in their regions.
Locking onto Mass Daily Necessities is Fundamental
Format segmentation is a product of the industrial structure's development stage. The foundation of retail, positioned for the daily necessities of most consumers, should inherently be neighborhood stores full of life.
The hypermarket model is indeed outdated, but the supply chain resources it has accumulated and the customer base of most consumers in its trade area are the foundation for traditional retail enterprises, especially regional ones, to survive. From this perspective, whether it's niche formats like warehouse clubs or community discount stores, or platforms empowered by various instant retail, these are all temporary, auxiliary formats that emerge with changes in the industrial environment.
The transformation bottleneck faced by traditional retail enterprises represented by hypermarkets is largely caused by their own model drawbacks. Their positioning for mass daily necessities determines that this group, especially regional small and medium retail enterprises, remains the main force in the domestic chain retail industry because their cornerstone role in the entire retail supply chain cannot be replaced by new niche formats or online instant retail platforms.
However, channel diversion has become the primary factor in the declining market share of traditional retail enterprises. The fundamental reason for this phenomenon is the full utilization of various online and offline niche formats to provide maximum convenience for domestic consumption, thereby activating the release of upstream production and processing resources and maintaining economic vitality.
For a long time, the industrial structure of domestic upstream small and medium manufacturers is difficult to change, which also provides a resource guarantee for the demand channels of low-price consumer groups.
This industry phenomenon arises with changes in the macroeconomic environment. For example, rapidly growing instant retail platforms have improved purchasing efficiency and absorbed a large number of young laborers for employment, but the retail goods and infrastructure still largely rely on the resources of offline regional retail enterprise platforms and outlets.
To a certain extent, warehouse clubs meet the needs of middle-class and light luxury consumption, but their limitation lies in their pickiness about trade areas. Community discount stores and specialty stores, as niche category formats, struggle to meet customers' one-stop shopping needs and are not daily necessities, making it difficult for them to assume a mainstream position in the FMCG retail sector.
Traditional retail enterprises represented by hypermarkets, with their one-stop shopping supply chain systems, still have stronger adaptability. In the current market segmentation, what they need to do is fully leverage their rich product resources and, based on their own capabilities, expand diversified online and offline niche formats and consumption scenarios suitable for their local markets.